Inve$t | Market Sentiments
According to President of The Federation of Malaysian Manufacturers (FMM) Tan Sri Soh Thian Lai, FMM has raised concerns that the immediate jump to RM1,500 for minimum wage from May 1 may result in a steep cost increase and reverse the otherwise optimistic business recovery for 2022. The increase from the current RM1,200/RM1,100 to RM1,500 represents an immediate increase of 25-36% on the basic salary which will have a tremendous knock-on effect on the overall payroll cost and have a spiralling impact on business cost that could potentially derail the economic recovery. The industry has repeatedly affirmed that it is supportive of a review of the minimum wages but based on the current economic factors where the business environment continues to be fragile, a progressive adjustment with a RM150 increase in 2022 and a further increase of RM150 in 2023 to reach the RM1,500 minimum wage would be more manageable for the industry. The small and medium enterprises (SMEs), especially those in the suburban areas would be most impacted by this sharp rise in wage cost given that only the micro-enterprises will be exempted for a period of eight months until December 2022. The economy would also see an immediate monthly outflow of close to RM500 million with the repatriation of funds by foreign workers (based on 1.6 million legal foreign workers) with no direct positive impact on the local economy. As it is, the industry is facing an influx of cost increases as businesses continue to rebuild their performance to the pre-pandemic levels, including raw materials cost, logistics cost, and higher energy prices due to the rising commodity prices. Ultimately, the increase in minimum wages is going to further push cost of production and lead to greater inflationary pressures.
Near-term economic growth momentum to ease based on February’s Leading Index – DOSM
According to Department of Statistics Malaysia (DOSM) chief statistician Datuk Seri Dr Mohd Uzir Mahidin, Malaysia’s Leading Index (LI) recorded a healthier month-on-month (m-o-m) trend in February 2022, increasing to 110.8 points from 110.1 points in the preceding month. However, the annual LI showed a slower performance at negative 0.5%, signifying that near-term growth momentum would ease amid continued economic recovery. This was influenced by cautious investor sentiment in the stock market which was reflected by the downtrend in the Bursa Malaysia Industrial Index, backed by the healthcare and utilities indices during the month. On the m-o-m LI increase of 0.5% in the reference month, this was mainly contributed by growth in real imports of other basic precious and other non-ferrous metals (0.6%), real imports of semiconductors (0.4%) and Bursa Malaysia Industrial Index (0.2%). The LI is a predictive tool used to anticipate economic upturns and downturns in an average of four to six months ahead. The ongoing international crises have exerted further pressure on global economic growth through trade, inflation and financial markets, which in turn could disrupt the growth prospects of the Malaysian economy. Pertaining to current economic perspective, the Coincident Index sustained its growth by expanding 6.4% to 120.4 points in February 2022, from 113.2 points a year earlier.
Bursa Q1 net profit falls 44% as revenue slides from pandemic high
Bursa Malaysia Bhd’s net profit fell 44% to RM67.97 million in the first quarter ended March 31, 2022 from RM121.39 million reported in the same quarter of the previous year, attributed to a lower operating revenue due to a decline in securities trading revenue. Revenue for the quarter stood at RM165.3 million, a 29.4% drop from RM232.28 million reported previously. The securities market segment saw a 40.2% decline in profit to RM104.4 million in Q1’22 from RM174.6 million Q1’21 due to lower revenue, while its derivatives market segment posted a RM12.9 million profit for the quarter from RM11.6 million reported previously on the back of higher revenue. In addition, Bursa’s exchange holding company saw a lower loss of RM4.3 million for the quarter against RM5.1 million reported previously due to lower corporate social responsibility expenses and its others segment saw a 22% hike in profit of RM2.1 million from RM1.7 million. Its overhead rose by 12.3% to RM22.5 million from RM20 million in Q1’21 mainly due to higher depreciation and amortisation of assets.
According to Bursa CEO Datuk Umar Swift on the results, he pointed out that the average daily trading value of securities continued to normalise to pre-pandemic levels which contributed to the decline in profit for the quarter. However, profit after tax is 4.6% higher than the fourth quarter ended Dec 31, 2021 of RM65million, mainly contributed by a 2.8% higher average daily trading value registered this quarter. However, with the reopening of the economy and international borders, Bank Negara Malaysia expects Malaysia’s growth forecast to be between 5.3% to 6.3%. As such, better economic growth can be expected as the nation moves towards the endemic phase, and we anticipate more trading opportunities for investors due to movements in CPO prices, interest rate policies and the FBM KLCI. To sustain the interest of global investors, the bourse will continue to enhance the attractiveness of listed issuers through initiatives such as the Public Listed Companies Transformation programme launched earlier this year. Further, and in line with the Sustainable and Responsible Investment and environmental social governance agendas, the exchange will continue to deliver new product and service offerings as well as the new voluntary carbon trading platform, which will enhance the breadth and depth of the ecosystem.
Eye On The Markets
This week, on Friday (29Apr), the Ringgit opened at 4.3630 against the USD from 4.3335 on Monday (25Apr). Meanwhile, the Ringgit was 3.1500 to the Sing Dollar on Friday (29Apr). On Monday (25Apr), the FBM KLCI opened at 1599.38. As at Friday (29Apr) 10:00am, the FBM KLCI is down 1.85 points for the week at 1597.53. Over in US, the overnight Dow Jones Industrial Average closed up 614.46 points (+1.85%) to 33,916.39 whilst the NASDAQ added 382.60 points (+3.06%) to 12,871.53.